Accounting Procedure

What is Accounting Procedure?

The accounting procedure is defined as the process of standardized nature that performs a specific accounting function that are designed to incorporate better risk management policies so that these functions are completed in a more productive and efficient manner. The accounting department performs several functions such as perform billings for their customers, provide invoices to suppliers, perform bank reconciliation, and hence such tasks normally require comprehensive and streamlined procedures.

Characteristics of Accounting Procedure

Accounting Procedure

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#1 – Collection of Financial Information

It begins with the collection of financial documents. The information collected may be logged and maintained through physical mode or electrical mode. The cash register tapes, incoming bills, receipts, records of salaries, travel receipts, and forms along with invoices are examples of financial documents.

#2 – Account Reconciliation and Verification

Once logged into the system, the accountants verify the financial informationFinancial InformationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity more with the available evidence. Account reconciliation and internal as well as external reporting are performed as per the established accounting procedures. These procedures should be designed and constructed in such a manner that it records valid, objective, and accurate information. The procedures should be consistent and comparable.

Examples of Accounting Procedures

Example #1

The best example to describe the above point is that of inventory valuation. Once it is determined that inventories are to be recorded and valued using the First-in first-out inventory method, then it should not be changed to any alternative valuation method such as that to either the LIFO inventory methodLIFO Inventory MethodLIFO (Last In First Out) is one accounting method for inventory valuation on the balance sheet. LIFO accounting means inventory acquired at last would be used up or sold more or weighted average method.

Example #2

Another example could be of billing procedures wherein invoices are generally issued to the customers. This involves three broad tasks, namely information collection for invoices, creation of invoices, and issue them back to the customers. The people responsible for the billing process may review daily billing information and verify prices to process the order. Once review activity is complete, it may ask the system to print the invoices in a batch and wherein such printed invoices are then sent over to the billing address.

Example #3

The determination of payrollPayrollPayroll refers to the overall compensation payable by any organization to its employees on a certain date for a specific period of services they have provided in the entity. This total net pay comprises salary, wages, bonus, commission, deduction, perquisites, and other more for the employees is another example. The payroll executive may collect the following information, such as timesheets wherein they may review and approve the timesheets to record the hours spent by the employees working towards the said task. For the tasks worked, the corresponding wage rate is applied, and this, in turn, is utilized to determine gross pay and the net pay after tax deductions.

Example #4

Calculation of depreciationCalculation Of DepreciationThe Depreciation Expense Formula computes how much of the asset's value can be deducted as an expense on the income statement. Formula for Straight-line depreciation method= Cost of an asset - Residual value/useful life of an more for fixed assets is another example. Basis the reporting requirements on taxes or for accounting purposes, adoption of the MACRS depreciation or straight-line depreciation method can be looked upon to determine the depreciation expense of the asset.


  • IT helps in the process of decision making as it provides a framework and also an effective division of work between accounting departments.
  • Different accounting procedures require different levels of specialization and skills to record the information into the accounting systems.
  • It helps in recording of information of financial nature and non-financial nature.
  • It ensures that the recorded information can be cross-verified. It helps in making financial statements of uniform in nature and which could be utilized for industry analysis.
  • The application of the right accounting procedures ensures efficiency and time-saving in terms of recording information into the system.
  • It ensures that the business records are maintained in chronological order.
  • It ensures that the business complies with all legal and regulatory compliance.



The accounting procedures are a set of tasks or process that helps accounting department to streamline and perform useful accounting functions. This ensures better management of information with increased transparency and robust reporting of facts. Correct and to the point procedures of accounting helps in the preparation of useful and accurate financial statements.

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